“The Canada Revenue Agency’s (CRA) audit has revealed the organization failed to devote its resources exclusively to its own charitable activities by participating in a promoted donation arrangement involving a university prescribed in Schedule VIII of the Income Tax Regulations—the University of the West Indies, Mona Campus.”

It added, “The organization issued donation receipts exceeding $15.4 million for cash, substantially all of which was used to purchase life insurance policies with proceeds benefitting persons related to the Organization’s directors.”

In particular, the CRA says the organization failed to devote all of its resources to charitable activities, failed to accept valid gifts in accordance with the Act, issued receipts not in accordance with the Act, and failed to meet its disbursement quota.

In the case of Universal Community Help, the former charity received a letter stating:

“The Organization failed to maintain adequate books and records…did not maintain duplicate copies of all the donation receipts it issued, and we were unable to quantify the amount of the receipts issued. An analysis of bank deposits indicated the Organization had $448,023 more revenues reported than total bank deposits for the fiscal periods March 31, 2009 and March 31, 2010.”

A charity that’s had its charitable registration revoked can no longer issue donation receipts for income tax purposes, and is no longer qualified under the Income Tax Act.

If your clients have donated to these charities, make sure to contact them to assess how it impacts their tax planning.